Federal agriculture minister David Littleproud says Australian Wool Innovation has not achieved the cultural change expected over the last couple of years.
Mr Littleproud says he is "disappointed" that AWI is still "polarising within its industry", three years on from the body's last independent review.
"I get that there will be times when research and development corporations are not popular with their levy payers but this has gone on for a long time and in fact there doesn't seem to be any progression in terms of that cultural change that seeks to remedy the differing parties," he said.
Mr Littleproud said he doesn't believe there has been a cultural shift at AWI in terms of demonstrating transparency in its operations.
"The fact that the organisation is polarising is because it's become combative and we don't need that if there is a process and a structure whereby there is transparency built in and there's a culture within the organisation that sees transparency and accountability as one of its primary measures," he said.
"I think there's a lot of cultural issues that can be rectified to make sure AWI performs a lot better.
"I don't think it's broken, but I think it needs some work."
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It comes as work to reform Australia's agricultural research and development corporations is underway, with Mr Littleproud promising that future funding arrangements would be tied to bodies such AWI meeting expectations in regards to transparency and a range of key performance indicators.
"That's not just about return on investment, that's also about consultation and what effective consultation should look like, not just consultation for the sake of doing it," he said.
"We're getting back to first principles about value to the levy payer and value to the taxpayer because I represent the taxpayers.
"I'm making it clear to all the research and development corporations, all 15 of them that this is what I will expect moving forward."
The review, which has seen the formation of overarching body Agricultural Innovation Australia, is expected to be completed by the end of the year.
Mr Littleproud also said he had spoken with AWI chairman Jock Laurie last week and expressed his concern about Mr Laurie's recent description of mulesing as being an "agri-political" issue.
"With respect to mulesing I made it very clear to him I was underwhelmed by the commitment and work that had been done on mulesing," Mr Littleproud said.
"It is a matter for AWI to put together the research, the science, the technology that will address what is a medical procedure really and this is one area where we need them to give us the solution.
"That is their responsibility, I made that clear to him.
"With respect to markets and how that works in the future, the pressures around mulesing, then that is an issue for industry and government to work through with trading partners but their job is to provide us with the tools to be able to demonstrate that mulesing can be done with animal welfare standards in mind."
A spokesman from AWI said AWI had improved substantially over the past few years.
"Australian Wool Innovation has made substantial improvements in the past three years in terms of its performance, governance, consultation and engagement with woolgrowers," he said.
"The 2021 Review of Performance, to be released very shortly, will provide an independent assessment of the operational and cultural changes at AWI and how the organisation does it job on behalf of Australia's woolgrowers."
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